As noted in GAQC Alert #211, OMB hosted a one-hour Webcast on Friday, February 8th to discuss recently issued proposed changes to the requirements for single audits, as well as other key grant-related documents. If you were unable to attend the live event, it is archived on the U.S. Chief Financial Officers Council Web site.

As we communicated in GAQC Alert #212, the Governmental Audit Quality Center (GAQC) has been working for the last several months to develop updated illustrative auditor reports that reflect the new AICPA clarity auditing standards. The purpose of this GAQC Alert is to announce today's release of updated illustrative reports for state and local government financial statement audits. After reading this GAQC Alert, you will be aware of the following:

•

The background and process for the development and issuance of the report illustrations;

•

A summary of the key changes in the updated illustrative state and local government financial statement audit reports;

•

The status of the remaining illustrative reports to be released; and

•

A reminder to mark your calendars for a March 13, 2013, GAQC Web event titled, 2013 AICPA Guides for State and Local Governments, Not-for-Profits, and Yellow Book/Circular A-133 Audits: What to Expect for Clarity, Auditor Report Changes, and More, which will cover the revisions to the auditor's reports in more detail.

Background and Process

The GAQC is closely involved with two key AICPA Guides—the Audit Guide, Government Auditing Standards and Circular A-133 Audits (GAS-A133 Guide), and the Audit and Accounting Guide, State and Local Governments (SLG Guide). There are close to 30 report illustrations contained in these two guides. While last week the GAQC released updated report illustrations from the GAS-A133 Guide, the report illustrations being released today are from the SLG Guide.

The GAQC has spent considerable time working with our relevant volunteer committees to develop these updated reports and to gain the appropriate feedback and clearance on them. All of the reports issued today have been reviewed and cleared by members of the AICPA Auditing Standards Board. Auditors are reminded that they should exercise professional judgment in any situation not specifically addressed in the illustrative reports.

These illustrative financial statement audit reports are excerpts from Appendix A of chapter 14 of the SLG Guide and they will be incorporated into the 2013 edition of the SLG Guide to be released in late Spring 2013. That Guide, once issued, will also include a number of additional examples.

The illustrations issued today include five financial statement audit reports illustrating various fact patterns. The reports reflect the requirements of various clarity auditing standards including AU-C section 700, Forming an Opinion and Reporting on Financial Statements (AICPA, Professional Standards); AU-C section 705, Modifications to the Opinion in the Independent Auditor's Report (AICPA, Professional Standards); AU-C section 720, Other Information in Documents Containing Audited Financial Statements (AICPA, Professional Standards); AU-C section 725, Supplementary Information In Relation to the Financial Statements as a Whole (AICPA, Professional Standards); and AU-C section 730, Required Supplementary Information (AICPA, Professional Standards).

Revised wording to adhere to new requirements in the clarity auditing standards;

•

How the state and local government opinion unit audit concept fits into the new clarity reporting structure;

•

The addition of various subheadings describing the financial statement audit including "Management's Responsibility," the "Auditor's Responsibility," and "Other Matters" (e.g., reporting on required supplementary information or other information);

•

The changes that would be made and additional subheadings that would be added when the auditor has opinion modifications on one or more opinion units and unmodified opinions on other opinion units;

•

The inclusion of an optional table within the report to more clearly communicate when more than one type of opinion is being issued and the nature of the opinions issued (e.g., unmodified, qualified, adverse); and

•

The modifications that would be made to the reports when the audit is being performed under both AICPA generally accepted auditing standards and Government Auditing Standards.

As noted in GAQC Alert #210, the U.S. Department of Housing and Urban Development (HUD) recently updated the reporting guidance for for-profit entities in Chapter 2, Reporting Requirements and Sample Reports, of the Consolidated Audit Guide for Audits of HUD Programs (HUD Guide). That chapter did not include updated report illustrations. HUD asked the AICPA to provide it with updated clarified illustrations that are in line with those that will appear in the GAS-A133 Guide for use in the HUD Guide. The GAQC is currently putting the finishing touches on the illustrative HUD reports and working to get the necessary internal approvals. As soon as they are sent over to HUD in draft form (i.e., next week), the GAQC will post them to its Web site and notify members via a GAQC Alert. If you need to issue HUD reports prior to the posting of these drafts, you can use the report illustrations released last week (further described in GAQC Alert #212) to assist you in developing your reports.

Upcoming GAQC Web Event to Cover Updated Report Illustrations

Please remember to mark your calendars for the upcoming March 13, 2013, GAQC Web event titled, 2013 AICPA Guides for State and Local Governments, Not-for-Profits, and Yellow Book/Circular A-133 Audits: What to Expect for Clarity, Auditor Report Changes, and More. The event will be held from 1:00PM - 3:00PM (Eastern Time) and will cover the revisions to all of the auditor's report in more detail, as well as other significant changes you can expect to see in the Guides. A future GAQC Alert will provide you with registration instructions.

* * * * *

Sincerely,

AICPA Governmental Audit Quality Center

Stay Informed

To stay abreast of these and other relevant events, visit the GAQC Web site. Also, we welcome any suggestions or questions. Please send them by e-mail to gaqc@aicpa.org.

GAQC members may only reproduce and distribute GAQC e-alerts internally within the firm or State Audit Organization to other Center member personnel as part of the organization's professional services. For information about permission to copy any part of these documents for redistribution or inclusion in other work, please click on the copyright notice at the bottom of the page or phone the AICPA copyright permission hotline 919-402-4031.